Today it was announced that “Fideiussioni Digitali” the Italian blockchain project for issuing surety bonds or guarantees, has completed its pilot phase and will launch in the second half. The project was developed by CeTIF (Research Centre on Technology), payments network firm SIA and tech company Reply, with involvement from the Bank of Italy, insurance regulator IVASS, and the Italian Finance Police.
More than 50 organizations participated in the four month pilot, including banks, insurers, public sector organizations and the contractors and companies involved in the guarantee process.
Sureties tend to be needed when tendering for construction and government projects. The supplier pays a bank or insurer to provide a guaranteed payout to the buyer if the supplier fails to perform its side of the contract.
With rampant fraud in the Italian surety sector, addressing this was the original motivation behind the blockchain project so that parties could be sure the guarantor was legitimate. Over a four year period, surety bond fraud amounted to €1.6 billion ($1.76 billion). The problem was often that a fake guarantor issued surety bonds that weren’t worth the paper they were written on.
On the topic of paper, the digitization of the process is a second benefit, reducing costs. The pilot found a 30% reduction in fraud and cost savings varying from 10% to 50%. We imagine much of the cost savings are from not having to visit branches in person. The Sandbox pilot involved 350 sureties over a four month period ranging in value from €10,000 to €1.4 million and averaging €275,000.
On top of these advantages, there was greater transparency and certainty of information, and the surety could be issued faster.
Following on from the pilot feedback, there will be technical, functional and regulatory improvements with a view to launch in the second half of the year.
Italy is home to one of the most successful enterprise blockchain projects, the Spunta project to automate interbank reconciliations, which more than a hundred Italian banks use. Founded by the Italian banking association’s ABI Lab, the solution was developed by NTT Data. Both Spunta and Fideiussioni Digitali (the surety bond one) use enterprise blockchain Corda and run on SIAchain, which operates on a European private network infrastructure that’s used for bank payments.
Two other significant blockchain surety and guarantee projects include the live Australian Lygon Ark platform from ANZ, Commonwealth Bank, Westpac, IBM and others, and another from Zurich and Accenture.